Economic Logic, Too

About Me

I discuss recent research in Economics and various events from an economic perspective, as the name of the blog indicates. I plan on adding posts approximately every workday, with some exceptions, for example when I travel.

Friday, August 29, 2008

Even when eligible, not everyone chooses to receive payments from welfare. This may be by ignorance or by choice. In the latter case, welfare payments may obliterate other incomes, or vice-versa. A particularly interesting problem is that of single mothers reporting (or not) paternity.

Indeed, reporting who the father of the child induces most of the time procedures by the state to obtain child support from the father. If the mother is a welfare recipient, most US states capture most of this child support. It becomes thus a strategic decision for the mother: report the father and see little in child support, or seek child support informally (and possibly not strain a relationship with the father).

Jennifer Roff shows that this can be formulated as a Stackelberg game where the mother is the leader. She shows in particular that the outcome of this game can have perverse consequences when states capture more of the child support payments: mothers report fewer fathers, and the total captured amounts are lower. Also, awarding high child support payments decreases expected payments as mothers expect fewer fathers to comply, mostly because because of low paternal incomes. In other words, it does not necessarily pay to play tough.

Thursday, August 28, 2008

These are tough times, and in tough times, the government is here to help. This is why the finance industry is getting help, people late on their mortgages can seek assistance, the Big Three in Detroit are asking for 25-40 billion dollars, airlines are clamoring for supports. What about those that planned ahead?

You have heard this argument already a thousand times: why should those that were foreseeing troubled times bail out the irresponsible ones? It is clear that Schumpeterian creative destruction is beneficial here and that the role of the government is not to encourage moral hazard. What about the current monetary policy of low interest rates, though? Retirees and those who planned ahead saved and are getting very low returns now, in fact in most cases below inflation. The popular press claims low interest rates are good for the economy, but this is not the case for everyone.

Time to increase interest rates to fight inflation (remember the Taylor principle: for every increase in inflation of one point, increase interest rates by one and a half points) and put some money back in the pockets of those bailing the others out.

Wednesday, August 27, 2008

Whenever we model economic behavior, we assume preferences are given and stable. If we observe from empirics that preferences change, we attribute this to changing circumstances: with a different choice set, people take different decisions. If the econometrician cannot observe this choice set, he then concludes that preferences change.

This conclusion is generally thought to be wrong, and it is concluded that something else must have changed. But what if preferences change indeed? This is the question that Anderson, Harrison, Lau ad Rutström have tried to answer by conducting a field experiment in Denmark. They performed a standard lab experiment to elicit risk aversion measures by offering several choices of lotteries to a diverse segment of the Danish population. Up to 17 month later, they revisited their subjects, again measuring their risk aversion and obtaining information about changing economic circumstances.

They obtain changes, nicely normally distributed around zero, from raw data, that is, not taking into account changes in circumstances. Doing the latter, they find that a more positive outlook on personal finances leads to lower risk aversion. But the changes in the coefficient of relative risk aversion are statistically significant but modest, in the order of 0.20. So we are still not too wrong to assume constant preferences.

Tuesday, August 26, 2008

There used to be a time where the discussion of unemployment over the business cycle was limited to disputes over the level of NAIRU and how monetary policy would influence it. How much progress we have made since. A first step has been the Mortensen-Pissarides matching function, which has considerably refocused the discussion on micro-foundations on unemployment with the use of explicit labor search models.

After Robert Shimer showed some serious doubts about some of the critical business cycle properties of the matching function models, considerable effort has been made to either salvage the matching function models by augmenting or modifying them in some ways, or to come up with more micro-founded ways to understand the matching process.

One such avenue is the directed search model, where job seekers purposely decide to apply to certain positions on the basis of some signal (say, a posted wage). Guido Menzio and Shouyong Shi just wrote a paper that should be a trend setter for this class of models. The particular appeal here is that they are able to find a solution for a search model with aggregate fluctuation that is easy to compute, quite a feat for any model with heterogeneity across agents.

It is incredible how much such modeling has progressed in recent years. In this model, firms endogenously choose whether to open vacancies and how much to offer for each. Workers, unemployed or employed, decide where to apply and how much to ask. Each match has idiosyncratic productivity. In equilibrium, unemployed workers are less discriminating as to where they apply, as they want to make sure they are the only ones applying. Employment matches are also dissolved endogenously.

Aggregate fluctuations are triggered by the standard productivity shocks. For example, a positive shock lets firms open more vacancies with different terms, and workers look for better terms and better application success rates. In addition, fewer matches are dissolved. Once calibrated, the model can explain 40% of the fluctuations in the unemployment-employment transition and all of the reverse transition. In addition, 80& of changes in unemployment and 30% of those in vacancies can be accounted just by productivity shocks.

Firms and workers are ex-ante identical here. They are all in the same sector. Once even more complexity can be added to the model, it looks very promising what could be achieved in terms of understanding fluctuation of employment and, eventually, what policies could impact it.

Monday, August 25, 2008

About now, most graduate Economics programs are starting. Time for me to give some advice on how to survive this first year.

The first year is going to be a grueling experience. Never before were you so challenged. You may have flown through your classes before, you may have been the first in class. Not anymore. Within a year, you are supposed to be literate in economic research, within a second year ready to contribute to the frontier of research. This is a very short time that will require substantial commitment. Be prepared to spend long hours studying. Do not fall behind. Work with fellow students, not against them. Look beyond the technical aspects of your classes and build up your economic intuition. Attend seminars. Seek contact with faculty beyond the classroom. Do not worry about thesis topics during the first year, but keep an eye open.

The most difficult time is probably going to be in December, where you will be doubting why you are getting into such a stressful adventure. Everyone goes through such a depression, and it is only those who manage to work past this episode who will be successful. So be aware that you will have doubts. Grow over them.

If you are married or in a relationship, it will suffer. Foreign partners get bored of neglect and should seek contact with other spouses in such a situation, or look into taking classes of their own. Still set aside some social time, even if it is just with fellow students. Graduate programs are very multicultural, it is great to learn about other cultures (and foods).

But not everything is stress, doom and gloom during the first year. You will learn exciting stuff, meet exciting people and build relationships that will last for a lifetime, both personal and professional. This is an exciting year where you are building the foundations for decades to come. Make the most of it!

Friday, August 22, 2008

One of the big challenges of Economic history is to explain why, a thousand years ago, Asia, and in particular China, suddenly stagnated and why in the following centuries Europe started growing, leading eventually to the Industrial Revolution before any other continent. Of particular interest here is that even when you abstract from the leaders of the Industrial Revolution and look at, say, Bulgaria, Norway and Portugal, they have done much better than the rest of the world. Why?

Some of the standard answers have been that this is due to 1) cultural aspects, but within the time line we are talking about here, this is endogenous; 2) chance events (steam engine, proximity of coal), but European countries away from such events also grew faster than Asian ones; 3) resource grab from America, but would Asia really have benefited from such manna?

Cem Karayalçin argues that this divergence in growth is due to the political competition in Europe. States were fragmented and small, and people could escape there policies by migrating. This was impossible in Asia once the Ottoman, Chinese and Mughal empires were created. The latter essentially had monopoly power over fiscal matters, and thus could exploit their trapped population without further harm to the rulers. Contrast this with Europe, where sovereigns had to be careful not to tax too much, to provide services for the taxes and even had to dole out incentives to attract farmers.

A particularly important aspect of this competitive environment in Europe was that sovereigns were careful to give sufficient guarantees for ownership, that is, not expropriate at will. This made the accumulation of capital favorable. The same cannot be said for Asian empires, where for example the 122 top ranking nobles received 1/8 of the national product of India at the time of Akbar. Bequests were typically confiscated. In the Ottoman empire, wealthy traders would be stripped of their assets if not killed. It is difficult to muster any aggregate savings necessary for capital accumulation in such a hostile environment.

Karayalçin's paper has two parts: one theoretical that demonstrates his points, the other historical where he justifies the assumptions underlying his results, for example evidence on mobility in Europe since medieval times, the lack thereof in the Asian empires, and the differences in taxation burdens. This paper makes Economic history exciting.

Thursday, August 21, 2008

US Economics undergraduate majors typically take four directions: straight to a job, to Law School, to Economics graduate studies or to an MBA (usually after a few years on the job). Law schools have proliferated and produced a glut of students which is clearly leading to starting wages that do not justify the cost of studies. Is it then worth taking on an MBA as an alternative?

Peter Arcidiacono, Jane Cooley and Andrew Hussey tackle this question with data from the GMAT, the standard test used to select MBA candidates. What is particularly interesting in this data is that it contains students that did not pursue the MBA, as well as what potential students were earning at the time they were taking the test and after studies.

So what is an MBA worth? A raw regression with few controls gives a return of 9.4% for men and 10.4% for women. Add controls for ability, returns drop to 6.3% and 6.7%. Or use fixed effects, and returns are only 4.8% and 3.8%. These numbers are truly not impressive given cost and supposed prestige of those programs. Which begs the question: are all MBA programs equally valuable?

For a school ranked outside the top 25, a full-time or part-time MBA program is essentially useless, in particular after controlling for ability. Executive programs have a return in the order of 11%. Going to a program ranked 11-25 increases returns by 27% (men) and 14% (women). Go to a top 10 school, and you can add another 6% or 28%.

Remember where the data comes from: people who took the GMAT and some decided not to go for an MBA. Is it because they realized they where not getting into a top school, so they skipped the MBA entirely, thereby making essentially the same return as those going to a lower ranked school? I call this an indifference point between going to school or not. So at the margin, going to a school outside the top 25 or not is equivalent.

What I conclude from this? Most MBA programs are not worth the time. Only the top programs give significant returns. This implies also that the top programs will continue to attract students without bounds. Harvard now graduates about 900 MBAs a year...

Wednesday, August 20, 2008

With the emergence of electronic money and prepaid cards, the debate about private money has reemerged. Stephen Williamson has long been and advocate of private issuance of money, even the complete privatization of this central bank activity. But he also acknowledges that there can be a lemons problem, as the quality of issued notes may vary. Think for example of gift certificates which may lose their value when the issuing store goes bankrupt or, more often, when they have an expiration date. This may call for some regulation.

Among proposed regulations is the requirement that private money be exchanged at par with "official" money. Clearly, if private money is perfectly credible, this would be an equilibrium outcome anyway. But if there are some doubts about private money issuers, their money should be redeemed at a discount in equilibrium. Imposing parity could clearly constrain the economy away from some optimum. This is the argument of David Mills in the lead article of the latest International Economic Review.

I like very much the money search approach, which is arguably still very crude, but has the immense merit to give true micro-foundations for money, instead of money-in-the-utility, ad hoc nominal rigidities or assumed Phillips curves. It allows to explicit the impact of institutions or policy on agents' behaviors. Search theory can also make statements about welfare.

In this case, the modeling allows to explicit the differences between a regime where market participants are free to determine the price of private money and free to accept it or not. It highlights how much stronger the gambles of accepting private money becomes when its price is fixed and the monitoring of private money issuers are imperfectly monitored. The essential issue is that with parity, price cannot function as signals anymore.

Tuesday, August 19, 2008

A new blog portal, Econ Academics, has been unveiled. It features blogs that discuss research in Economics, as opposed to current events or each other. I am happy not only to see mine featured, but also to discover a few other like-minded ones. And they are good. Check them out.

Monday, August 18, 2008

Bubbles are something thought to be irrational, like a feeding frenzy not linked to any fundamentals, but rather self-fulfilling expectations. Given that bubbles are essentially expectation based, it has been very difficult to prove their existence in the data. The reason is that they depend, by definition, on intangibles. But there are times where the guts just tell you that a bubble must have been there, and many feel so about housing in Anglo-Saxon countries in recent years. The question one can ask then is, how can such bublles happen?

Óscar Arce and David López-Salido make an interesting attempt at rationalizing housing bubbles. They build a model that features several equilibria, some bubbleless and under some conditions some with bubbles. They define a bubble as "the price of an asset that exceed the present discounted value of the dividends", in particular when households hold assets that do not earn any dividend. For this to happen, the interest rate needs to be equal to the growth rate (zero in the model), and the bubble represents the excess of savings, typically held by middle-aged households. Why? Because they have a collateral constraint on mortgages.

What does this mean? First, a policy of low interest rates encourages bubbles. That is something we knew. Second, high collaterals encourage bubbles. That seems a bit odd given the recent US experience, where there is a widely held belief that the lack of collateral constraints led to a surge in housing prices. I think this has to do with the definition of a bubble: it is not the price of the asset, it is the portion that is above what can be justified by fundamentals. With the decrease in collaterals, the bubble portion may have decreased, while the fondamental portion may have increased more.

As said, bubbles are very difficult to measure. This paper seems to make it even more difficult.

Friday, August 15, 2008

US politics are fascinating in some ways, for example because they pose many challenges to economic logic. Political economy, especially when applied to the United States, relies a lot on the concept of the median voter, self-interest and the fact that voters act rationally, that is, they understand what they are voting on.

Take one important dimension of electoral platforms: federalism and equalization payments across states. There is no explicit system that would redistribute fund across state in the US like there is in Canada or some European countries. However, there is implicit redistribution through various programs and through taxation. For example, if NASA gets more funding, Florida, Texas and California are going to benefit the most. If the food stamp program gets cut, Mississippi will suffer more than Massachusetts. And if the marginal income tax rate is increased for high incomes, Connecticut will suffer more than Arkansas.

The Republican party is typically associated with the right wing, which advocates little redistribution. The Democratic party is pushing for more redistribution, at least compared to the the Republican party. All this would imply that states that would gain the most from redistribution should vote for the Democratic party, right? Right?

Well, look at this data from the Tax Foundation, which describes for each dollar in federal taxes, how many dollars are spent by the federal government in that state. The states that gain the most from this type of redistribution are those that tend to vote Republican. And the bottom is a nice collection of typically Democratic states.

What does this mean? Voters do not understand what they are voting for? Republican congressmen are better at pork spending? Democrats are genuinely generous? Equalization payments are irrelevant and the observed correlation is spurious?

Thursday, August 14, 2008

The Wall Street Journal had yesterday an op-ed on the fact that a college degree often does not constitute proof of competency. As I have argued before, many students have no business being in college, but the latter graduate them anyway. This waters down the quality signal of a college degree. The response to this situation by various trades has been to certify themselves the competences of prospective tradespeople. Examples are the bar exam, CPA, CFA, actuarial exams, etc. Should the same apply to Economics?

In most US colleges, an Economics major has only two years of study in that field, hardly worth claiming to be an economist. To make matters worse, many Economics programs feed on the rejects fom business schools, who typically failed out because of low grades in basic Mathematics and Statistics. Hardly the best clientele for an Economics degree. While Economics programs typically dismiss more students than most other programs, they still graduate many that do not have required competences.

A test like the GRE subject test would have been a good start, but this has been cancelled in 2001. The American Economic Association has been thinking about devising some criteria to be voluntarily applied to college curricula, but I think something much more drastic would be needed.

Wednesday, August 13, 2008

A US Economics department hired an non-US citizen. It needs to provide evidence that it did a search which was proper in order to obtain a visa for the new faculty: no discrimination against Americans, open position properly advertised, no undercutting of wages, and the best available was hired. These are procedures that are common to every country. It is in the details that the hassle starts.

Remember when Jobs Openings for Economists (JOE), published by the American Economic Association, was a print publication? You could then just put an issue in the documentation to send to state and federal authorities to prove that you did a proper search. Now that JOE is online only, you cannot do that. And a printout from the web page is not legal documentation. So how can you provide documentation that fits the criteria, that is, is in a printed outlet? Put an ad in the Chronicle of Higher Education, which nobody reads. If you did not think of this little trick, you are in trouble.

Tuesday, August 12, 2008

You are building up assets for retirement. What is the best portfolio to do this? This question has been studied before, but has neglected flexible labor supply. Indeed, if for some reason your retirement did not work out as expected, you should still have the option to work (again/more). Gomes, Kotlikoff and Viceira takes this idea to a calibrated life cycle model and come to the following conclusions.

First, no surprise, young people should start accumulating for retirement right away. But the accumulation of assets stops before retirement. Why? As wages decline typically after age 55, it is better to increase leisure and start drawing on assets.

Second, young people should invest fully in stocks and take advantage of the higher return in the long run. In the early thirties, they can start investing in bond, at an increasing share all the way to retirement. But the stock share always stays above 45%.

Third, once retired, draw first on the bonds, so that the stock share increases. Why would one want to increase the risk of the portfolio as one ages? It is not that risky, as there is fixed income from social security.

And what did flexible labor supply add to this? One needs to accumulate less assets for retirement, the self-insurance aspect being lessened. Also, it is possible to have a more risky portfolio and thus reap the benefits from the long-term equity premium over bonds. Finally, the modeling indicates that one should retire gradually. The only sudden shift in behavior is due to social security payments kicking in at 65.

Monday, August 11, 2008

It is interesting to follow Olympics in various countries. While everywhere there is focus on domestic athletes, big countries, say the US, only consider gold medals to be worth mentioning, while in small ones, say Denmark, even Olympic diplomas (ranks 4-8) make major news. This brings up the question: why reward more than the winner?

Pavlo Blavatskyy demonstrates that giving a single prize elicits a lot of effort from a few athletes. Giving several prizes reduces the effort of those few, but this may increase the overall effort as more athletes participate.

Given, as I suggested above, only gold medals are worthwhile in big countries, I wonder whether we can see more effort from the top athletes from big countries, while we see more effort from small country citizens among diploma-worthy athletes. An empirical test of this would be difficult, though. Indeed, a prediction of this theory would to find proportionally more athletes from small countries in ranks 2-8. But larger country athletes could simply be missing from because a fellow citizen won.

Friday, August 8, 2008

Now that the Olympic Games are about to start and the patriots start counting medals, let us ask what determines the success of a country at these events? Obviously, size matters, in particular for team events (and this is why I frustratingly root for the little countries). Bernard and Busse show that economic development also matters. This is not surprising, as a country need to reach some development level to devote resources to sustain a competitive sports program.

Of course, Olympic success can be a function of how much sports and in particular competitive sports enjoy public support. Rathke and Woitek make exactly this argument using stochastic frontier analysis which measures how far a country is from its potential. Tcha and Pershin find that, much like in international economics, high-income countries specialize less in particular sports.

Thursday, August 7, 2008

We all agree that playing the lottery is a very poor way to save for retirement. One can rationalize it under some circumstances, but it is generally frowned upon. It turns out that 40 percent of UK citizens play a lottery to save for retirement. And this is encouraged by the government.

They invest in Premium Bonds, a financial vehicle known around the world as lottery-linked savings (LLS). LLS programs are especially popular among low-income households and, in the case of developing economies, with people outside the banking system. How do they work? Bonds are issued that yield a rather normal return, but periodically a lottery is drawn among all bonds yielding some additional return, sometimes substantial. So it is like buying a bond and a lottery with the same ticket.

Do people who buy LLS bonds buy them for the savings or for the gambling? Peter Tufano answers this question by using time series of Premium Bond sales in the UK, comparing them to various betting schemes, other ways of saving, economic activity and marginal tax rates (PB winnings are not taxable). The outcome: the size of the largest prize matters, even though it represents only 2% of the expected return. PB sales respond positively to overall gambling activity, but also to relative yields with other financial vehicles. But the terms of the PBs do not affect their redemption, indicating that they are mostly a regular savings vehicle.

Are LLS bonds a good way to introduce low-income households to savings? The British experience seems to indicate so. But they are prohibited in many countries, including the Unites States, as they violate lottery laws.

Wednesday, August 6, 2008

The life cycle, the educational outcomes and the labor market of US households have been amply studied. Results are generally well established, for example that the gender gap has considerably narrowed, that the college premium has continued to rise and that female labor supply has increased a lot but is now stagnating. Claudia Goldin and Lawrence Katz have undertaken a new kind of analysis, studying the outcomes of Harvard graduates.

Why would we care? This is only a very small fraction of the population, not representative at all, and way out in the tail of the distribution. For one, they are over-represented among the decision-makers in the United States, and thus their personal experience influences their perception of what happens to others. Second, the education of the elite is typically heavily subsidized (privately or publicly), thus it is important to understand whether it is worth it.

This is an ongoing project, so not all questions have been answered yet. But the Harvard And Beyond Project website already offers a glimpse of some of the answers Goldin and Katz may have. Here are some results I found interesting.

The vast majority have pursued graduate degrees after their BA at Harvard. This proportion has increased for females and has remained stable for males. In the most recent cohort (1990 graduates), two thirds went for a graduate degree. In other words, for most, even a degree from the most prestigious program is not sufficient.

Harvard graduates earns a lot 15 years after graduation. For those with full time jobs, the median is at $112,500 for women and $187,500 for men. The gender gap is considerable, even after controlling for labor supply.

They marry later and have much fewer children than the general population.

They barely have any non-employment spells. Even among women who had children, over half never had an non-employment spell of more than six months. Penalties in earnings are severe for time off, especially among MBAs.

Thus if we have made much progress to reduce gender gaps and pregnancy penalties in the general population, the same cannot be said for the elite.

Tuesday, August 5, 2008

Retirees face a major uncertainty when they have to decide how much to spend from their assets: how long they are going to live. You do not want to spend too much in case you end up centenarian, but it would also be a waste to live thriftily when one ends up dying early. Luckily, the market provides a solution and has done so for centuries: annuities, which provide a constant stream of income as long as one is alive. This represents substantial welfare gains. Yet, very few people take advantage of this.

The literature has been puzzling over this for a while, see Jeffrey Brown. For one, public pension plans already provide some constant income. But this still leaves a lot of gain from annuities. Inflation risk is not a problem as annuity products are offered that are indexed, even even some that provide long-term care benefits. Bequest motives have been ruled out as well, as is risk-sharing within families.

Note also that in a lot of the life-cycle modeling with uncertain lifetimes, researchers use annuities to represent the dynamics of assets during retirement and death, because it is simple to model and because it is plain rational to buy annuities. The fact that this is not borne by facts is worrisome for some results coming out of this research.

In a recent NBER paper, Brown, Kling, Mullainathan and Wrobel may have found a solution to the annuity puzzle: it is all about how annuities are sold. If it is clearly labeled as a consumption insurance, then people are willing to buy it, as consumption risk is minimal. If it is sold as an investment, people realize it is very risky (as an investment): one may lose a lot if one dies early. This does not look like a rational reasoning, but the authors have conducted experiments that confirm that how annuities are framed matters crucially.

Then why would companies selling annuities frame it as an investment product? The authors conjecture that this is simply what they are used to. Maybe this research will show them how to change their marketing.

Monday, August 4, 2008

Reading this article in the Guardian on how some experts in biology just cannot seem to manage to make their point against laymen, I kept wondering whether economists have the same problem. Everyone is a self-proclaimed expert in Economics, both because of the confusion between policy goals (the realm of politicians) and policy means (the realm of economists) and because everyone is part of the "Economy."

Now, let me make sense of this long sentence. What are economists good at? Seeing the big picture, finding in which ways things interact in a general equilibrium sense, figuring out how incentives work. Thus, they are more detached from the nitty-gritty and can see the complexity of things, unintended consequences, and externalities. The layman is generally not equipped for this. This is why you need to be trained as an economist to figure out the consequences of policy, for example.

Yet, too often, economists do not manage to convince public and authorities about policy. Think about rent control, labor market over-regulation in Europe, gas taxation in North America, red tape in developing economies, or the overall lack of understanding about the role of market forces. When I speak with non-economists, I am regularly stunned by their reasoning and their unwillingness to understand the "true" Economics, mostly because it does not suit them, not because there would be a logical flaw. Quite frustrating, especially considering that these people then vote.

I am all for people to vote on policy goals. But when it comes to how those goals are to be reached, leave the methods out of the policy debate and let the experts take care of it. If you want to build a dam, you do not let people vote whether it is going to be made of concrete or earth, you let experts decide. And so it is when it needs to be determined whether a particular medical drug is safe or not. Or whether one should put fluoride in city water.

Set a goal for pollution reduction, then let experts take over. Set a goal for educational outcomes, and let experts figure out whether school vouchers are the way to go. Set a goal for dependence on Middle-East oil, then let experts get us there. Set a goal for school achievements, let experts get us there.

Enough for this rant. I promise to be more academic in the next posts.

Friday, August 1, 2008

Do not worry, I am sticking to prose for this post. This about a paper with the same title by Hugo Mialon. He looks into how economists choose the titles of their papers and finds that 28% of titles include some form of rhetorical device. He also finds that this leads to four more citations for the paper.

While I agree that a title can tease someone into reading some work, there is a big step to generating a citation. Citations are not for titles, but for content (hopefully). Now, would the citer never have read the paper if it were for the title? Poetic titles often hide the true content of a paper, thus a case can be made for missed citations because of the title.

Then why does Mialon find four more citations for poetic titles? He focuses on article published in the top three journals. These papers are read anyway, poetic title or not. I think his result would be reversed when looking at working papers, where a poetic title is really hit or miss. His sample only has the hits.